An Assessment of African Open Skies Raphael Kuuchi, Director, Commercial/Corporate & Industry Affairs, AFRAA. Background

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1 An Assessment of African Open Skies Raphael Kuuchi, Director, Commercial/Corporate & Industry Affairs, AFRAA Background In Africa, where poor roads, ports and railway infrastructure often constrain the rapid and efficient transportation of goods earmarked for export as well as passengers, air transport holds both a potential for growth and a role for the economic development of the continent by fostering trade and foreign investments. However, Africa's air transport industry has always been a relatively small player in the global industry, contributing less than 3% to total global traffic. This notwithstanding, aviation is a key driver of Africa s economy. Some 6.7 million African jobs and US$67.8 billion in African GDP are supported by air transport. In fact, the benefits of aviation connectivity go beyond these jobs and GDP contribution. With a few kilometers of runway the most remote region can be connected to the global community and this could translate to access to vital health care; emergency humanitarian assistance; movement of products to global markets; more tourists; opportunities for exploring the world and even creating businesses. After independence, most African states set-up their own flag carriers, which primarily served on a few intercontinental routes and a few capital cities of friendly States on the continent. Several early attempts to unite various small African carriers were not successful. As a consequence, the domestic and regional air service market remained underserved, inefficient connected, underdeveloped, and uncompetitive. In order to address these shortcomings, African Ministers responsible for civil aviation in 1999 adopted the Yamoussoukro Decision (YD) on the liberalization of air transport markets in Africa. This pan-african treaty was widely expected to freely allow airline operations on the African continent. More than a dozen years after formally adopting liberalization of air services, full implementation of the YD is still far from been achieved. Nevertheless, noticeable progress towards bilateral liberalization is taking place in many countries on the continent especially in the West/Central and East Africa sub-regions with some States relaxing the Bilateral Air Services Agreements (BASAs) to allow more flights and frequencies. At least, 26 countries in West/Central Africa have granted one or more 5th freedom traffic right(s) to third countries. The Yamoussoukro Decision remains the single most important air transport reform policy initiative by African Governments to date. It was adopted out of the recognition that the restrictive and protective intra-african Bilateral Air Services Agreements (BASAs) hampered the expansion and improvement of air transport on the continent. A vital part of the Decision was liberalization; to develop air services in Africa and stimulate the flow of private capital in the industry. However, throughout the years, the full potential of the Decision has not been realized. Therefore, it remains imperative to ensure full implementation of the Decision for the African airline industry to realize its full potential.

2 Protectionism Blocking Liberalisation The lack of full implementation of the YD is partly driven by the governments of a number of African countries determined to protect their national carriers. They refuse to liberalize their air transport markets irrespective of the obligations they have assumed under the YD. The desire by each country to have a national airline and the absence of a mechanism to form and jointly own airlines on the continent is a major impediment to liberalization. This has hindered full liberalization of the continent s air transport sector and effectively prevented African airlines from taking full advantage of the positive economic impact of air transportation. Even though the YD allows any African airline to operate freely to any destinations on the African continent, there are countries that restrict market access under the pretext that their national airline is not ready to compete in a liberalized market. Some countries on the otherhand, insist that non-local airlines pay royalties for the privilege of using additional frequencies beyond what is allowed under the Bilateral Air Services Agreement. Mixed Outcome in West/Central Africa The pace of liberalization is painfully slow and this is adversely affecting the growth of carriers on the continent that have the capacity and resources to expand their network. While some African States are rigid in their application of the BASAs with fellow African States, they appear to be more liberal with non-africa States. This is particularly the case in most of West Africa, where non-african airlines tend to be given more 3rd/4th and sometimes 5th freedom traffic rights while African carriers are denied. With limited market access, it is very difficult for carriers in the region to grow and compete effectively. It is not surprising that West Africa remains the only sub-region in Africa where travelling between cities is not just expensive but time consuming and marred with long delays and poor customer service. Consciously or unknowingly West African States are building their hub airports in Europe and the Middle East and this explains why it is often more convenient and faster (though expensive) to fly from a city in West/Central Africa via London, Paris, Amsterdam or Dubai and back to a neighbouring city in West Africa than to travel direct. To ease the travel burden, we need policy and regulatory changes by Governments in Africa that will facilitate the full implementation of the Yamoussoukro Decision. A study by published by the World Bank on the status of implementation of the YD revealed the outcome below. Grading the level of the implementation of the Yamoussoukro Decision Community Status of YD Implementation Status of air services liberalisation Implementation score AMU No implementation No liberalisation within the AMU 1 initiated, but need is recognised BAG Principles of the YD agreed upon in a Up to fifth freedom granted, tariffs are free, and 4 multilateral air services agreement capacity/frequency is open CEMAC Principles of the YD agreed upon in an Up to fifth freedom granted, tariffs are 5

3 COMESA EAC SADC air transport program. Some minor restrictions remain Full liberalization decided ( legal Notice No. 2 ), but application and implementation remain pending until a joint competition authority is established EAC council issued a directive to amend bilaterals among the EAC states to conform with the YD No steps taken toward implementation, although the civil aviation policy includes gradual liberalization of air services within the SADC free, and capacity/frequency is open. Maximum two carriers per state may take part Pending. Operators will be able to serve 3 any destination (all freedoms), and tariffs and capacity/frequency will be free Air services are not liberalized, as the 3 amendments of bilaterals remain pending No liberalization has been initiated 2 WAEMU The YD is fully implemented All freedoms, including cabotage, have been granted. Tariffs have been liberalized Source: Schlumberger 2008: = Least implementation; 5 = Most implementation 5 Integrated African Air Transport Policy The recently adopted Africa Civil Aviation Policy (AFCAP) has now given the continent a policy document and framework for a coordinated approach to development of aviation. Under the guidance of the African Union, this policy document should guide the development of aviation on the continent, especially on matters pertaining to: Safety and security The environment Competition regulation Consumer protection Provision of infrastructure Liberalisation Relationship with third parties Airport fees and charges Foreign investment and ownership of airlines The air transport industry in Africa can only develop and survive the fierce and competitive environment if the African air transport policy is implemented. Unfair and Discriminatory Practices There is need for a level playing field in air transport services. Often one finds that non-african carriers are given favourable traffic rights whilst the same is denied to African operators. Whereas some States in Africa have refused to open their skies to each other they have opened up to carriers from other continents. Some 23 African countries have signed open skies agreements with the USA, while not a single country has fully liberalise it skies in compliance

4 with the YD. For instance, 17 foreign airlines are currently benefiting from 5th freedom rights between certain African cities compared to only 11 African airlines. The EU banned list of airlines is being applied in a non-transparent manner and being used to constrain the development of African aviation. In the words of the IATA Director General and CEO, Tony Tyler, at the recent IATA Africa Aviation Day event in Addis Ababa, The banning of some airlines by the EU is inappropriate and does not help to improve safety. Whilst acknowledging that safety levels in Africa, although improving significantly over the years, still need to reach world standards, we find it ironic that the EU alleges that parts of the African airspace is unsafe and yet EU airlines continue to fly to these same unsafe destinations. There is need for the AU and African Governments to intervene to create a level playing field and guard the African air transport industry against unfair and restrictive business practices by carriers outside the continent. These non-african carriers currently transport over 80% of intercontinental traffic to/from Africa. Non-Physical Barriers A lot of resources have been committed to the provision of air transport infrastructure in Africa and yet the efficient utilization of this infrastructure is been constraint by non-physical bottlenecks to traffic flow. These bottlenecks range from issues such as non-availability or acute shortage of foreign exchange, cumbersome immigrations/customs processes and procedures and high taxes, fees and charges. Visa requirements are unnecessarily stringent, expensive and often take a long time to process. Often, countries do not exchange embassies requiring one to travel to another country to get a visa. In South Africa, for instance, some African nationals are required to have a transit visas even if you are merely transiting through the airport. On the contrary, many European and American citizens do not need visas to enter South Africa. The Africa Union needs to exert pressure on countries to eliminate or minimise non-physical barriers so as to reap the benefits of free movement of people and goods, which will in turn increase international trade and facilitate the speedy development and integration of the continent. Leadership and Direction The African Union has a duty to provide leadership to ensure the social, economic and political integration of the continent through, among other things, efficient, reliable, economical, safe and secure air transport services. It has to provide a policy framework for the development of the aviation industry at the international, domestic, regional levels, including through skills and infrastructure provision. It needs to set out initiatives to ensure better planning and integrated development on and around airports and to lessen the adverse effects of aviation activity on the environment and communities.

5 Leadership in Africa s air transport liberalization requires understanding of the factors slowing down the liberalisation process, the will and commitment to ensure progress and success. With its objective to promote sustainable development and integrating the African economies, the African Union (AU) has the duty to provide the platform for steering the Yamoussoukro Decision and indeed the liberalization process of the air transport industry on the continent. In addition to leading, the African Union (AU) has to mobilise and avail adequate resources and strengthening AFCAC and the Regional Economic Communities (RECs) to execute their mandates as prescribed in the YD policy document. The RECs in West and Central Africa namely ECOWAS CEMAC and UEMOA, and the East and Southern Africa; COMESA, EAC and SADC have taken measures to harmonize Economic Regulations (market access, consumer protection and competition laws) in their respective member States and cooperate in the implementation of the Decision. A workshop held on April 2013 in Harare, Zimbabwe, by COMESA, EAC and SADC on the operationalization of a Joint Competition Authority (JCA) for the tripartite is one example of ongoing efforts to fully liberalized the market in the eastern and southern African sub-regions. The JCA will be the main organ tasked with overseeing the harmonization of regulations and the full implementation of the YD in the 3 RECs. Whether COMESA, EAC and SADC can fastrack what they have so far been unable to achieve (liberalization of air transport) at each REC level under the JCA remains to be seen. At the continental level, the African Civil Aviation Authority (AFCAC) has been granted the mandate to carry out the functions of the Executing Agency. Detail work has been done by a consultant on the operationalization of the Executing Agency. A validation workshop will soon be held to endorse the work done and progress to the setting up of the necessary structures. The pace towards getting the Executing Agency to start working is rather slow. With the necessary support from the AU, the whole continent is looking up to AFCAC to deliver the dream of a single African sky soon. Conclusion African airlines are adversely affected by the slow pace of the liberalization process. However, rather than airlines complaining about the restricted market access, they should find ways of cooperating more amongst themselves to overcome limitations broaden their market access. Non implementation of the YD does not prevent airlines from entering into code share arrangements, sharing capacity, signing Special Pro-rate Agreements (SPAs) and other commercial arrangements which are currently few and far between. Infrastructure challenges remain a major concern in Africa. Airlines can assist the airports especially in small, resource-stuffed countries to provide needed infrastructure. In return, we believe the airports can evolve schemes that will enable airlines investing in infrastructure to recover their investments. Also those States or regional economic communities that are ready for the full implementation of YD should not wait for the rest of the continent before liberalizing their markets. They should

6 just go ahead and set the example and allow the rest to follow. This appeal is especially to States that have big intercontinental carriers with substantial intra-africa networks and large/populous countries on the continent. If these open up their markets, the smaller countries will have no choice but to do same. Africa stands to benefit immensely from a liberalized regime of air services on the continent. Currently, aviation contributes about US$67.8 billion in GDP to Africa, supports 6.7 million direct, indirect and induced jobs and transports 126 million passengers annually including 51% of international tourists. With a population of around one billion people and a fast growing middle class, African airlines can contribute significantly more to the socio-economic development of the continent if the market is fully liberalized and a level playing field created for all operators.

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